Development

Low-income countries differ from higher-income countries in that they have large informal sectors, greater prevalence of self-employment and subsistence agriculture, low female labor participation rates and poor labor market conditions. As labor is most often the only asset of someone in poverty, policies that are not associated with job creation may fail to reduce poverty. Contributions to this subject area deal with the potential of labor economics to address those challenges.

  • Do firms benefit from apprenticeship investments? Updated

    Why spending on occupational skills can yield economic returns to employers

    Robert Lerman, October 2019
    Economists have long believed that firms will not pay to develop occupational skills that workers could use in other, often competing, firms. Researchers now recognize that firms that invest in apprenticeship training generally reap good returns. Evidence indicates that financial returns to firms vary. Some recoup their investment within the apprenticeship period, while others see their investment pay off only after accounting for reduced turnover, recruitment, and initial training costs. Generally, the first year of apprenticeships involves significant costs, but subsequently, the apprentice's contributions exceed his/her wages and supervisory costs. Most participating firms view apprenticeships as offering certainty that all workers have the same high level of expertise and ensuring an adequate supply of well-trained workers to cover sudden increases in demand and to fill leadership positions.
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  • Designing labor market regulations in developing countries Updated

    Labor market regulation should aim to improve the functioning of the labor market while protecting workers

    Gordon Betcherman, September 2019
    Governments regulate employment to protect workers and improve labor market efficiency. But, regulations, such as minimum wages and job security rules, can be controversial. Thus, decisions on setting employment regulations should be based on empirical evidence of their likely impacts. Research suggests that most countries set regulations in the appropriate range. But this is not always the case and it can be costly when countries over- or underregulate their labor markets. In developing countries, effective regulation also depends on enforcement and education policies that will increase compliance.
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  • Public employment in the Middle East and North Africa

    Does a changing public sector workforce in the MENA region provide an opportunity for efficient restructuring?

    Public sector hiring has been an essential component of the social bargains that have maintained political stability in the Middle East and North Africa (MENA). As these bargains eroded, public sector workforces contracted in relative terms owing to a partial freeze on hiring and the promise of lifetime job security for incumbent workers. This had profound effects on the age composition of the workforce. The upcoming retirement of many workers provides an opportunity to restructure public sector hiring to emphasize meritocratic recruitment processes and performance-based compensation systems.
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  • Compliance with labor laws in developing countries Updated

    Non-compliance with labor legislation is widespread and this has critical implications for understanding labor markets in developing countries

    Compliance with minimum wage laws and non-wage conditions of employment often depends on labor market specific factors. In developing countries, many workers still earn less than the legal minimum and lack access to mandated non-wage benefits. Enforcement has not kept up with regulation growth and compliance has not been measured from a multidimensional perspective. Such an approach would help to understand the impact of institutional variables and country-specific approaches on the level of labor law violation. The difference between de facto and de jure regulation remains particularly pertinent in countries where compliance is low.
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  • Do school inputs crowd out parents’ investments in their children?

    Public education tends to crowd out parents’ time and money, but careful policy design may mitigate this

    Birgitta Rabe, May 2019
    Many countries around the world are making substantial and increasing public investments in children by providing resources for schooling from early years through to adolescence. Recent research has looked at how parents respond to children’s schooling opportunities, highlighting that public inputs can alternatively encourage or crowd out parental inputs. Most evidence finds that parents reduce their own efforts as schooling improves, dampening the efficiency of government expenditure. Policymakers may thus want to focus government provision on schooling inputs that are less easily substituted.
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  • Redesigning pension systems Updated

    The institutional structure of pension systems should follow population developments

    Marek Góra, April 2019
    For decades, pension systems were based on the rising revenue generated by an expanding population (the so-called demographic dividend). As changes in fertility and longevity created new population structures, however, the dividend disappeared, but pension systems failed to adapt. They are kept solvent by increasing redistributions from the shrinking working-age population to retirees. A simple and transparent structure and individualization of pension system participation are the key preconditions for an intergenerationally just old-age security system.
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  • Self-employment and poverty in developing countries Updated

    The right policies can help the self-employed to boost their earnings above the poverty level and earn more for the work they do

    Gary S. Fields, March 2019
    A key way for the world’s poor to escape poverty is to earn more for their labor. Most of the world’s poor people are self-employed, but because there are few opportunities in most developing countries for them to earn enough to escape poverty, they are working hard but working poor. Two key policy planks in the fight against poverty should be: raising the returns to self-employment and creating more opportunities to move from self-employment into higher paying wage employment.
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  • Enforcement of labor regulations in developing countries

    Enforcement improves legal compliance, but its impact on welfare is country specific and unclear

    Lucas Ronconi, March 2019
    More than half of private sector employees in the developing world do not receive legally mandated labor benefits. These regulations have typically been enacted by democratically elected governments, and are valued by both formal and informal workers. Increasing public enforcement (e.g. inspections, fines, and workers’ access to the judiciary) can be a powerful tool to reduce violations (e.g. increase the number of employees earning above the minimum wage). Which factors determine enforcement, and whether enforcement produces more social benefits than costs, are, however, unanswered questions.
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  • Social protection programs for women in developing countries Updated

    How to design social protection programs that poor women can benefit from

    Lisa Cameron, February 2019
    Women are more likely than men to work in the informal sector and to drop out of the labor force for a time, such as after childbirth, and to be impeded by social norms from working in the formal sector. This work pattern undermines productivity, increases women's vulnerability to income shocks, and impairs their ability to save for old age. Many developing countries have introduced social protection programs to protect poor people from social and economic risks, but despite women's often greater need, the programs are generally less accessible to women than to men.
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  • Labor market consequences of the college boom around the world Updated

    Better information on university quality may reduce underemployment and overeducation in developing countries

    As the number of secondary school graduates rises, many developing countries expand the supply of public and private universities or face pressure to do so. However, several factors point to the need for caution, including weak job markets, low-quality university programs, and job–education mismatches. More university graduates in this context could exacerbate unemployment, underemployment, and overeducation of professionals. Whether governments should regulate the quantity or quality of university programs, however, depends on the specific combination of factors in each country.
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